It wasn't the usual response to a promotion. When Jackie Harvey was told late last year by Newcastle business school that she was being appointed professor, her main worry was what to call herself. Even now, more than a month into her new job, Harvey has yet to agree on her exact title. "Just call me something bland, such as professor of financial management, for the time being," she says.

Except that doesn't really begin to distinguish her from dozens of other professors in dozens of other business schools - not least because her special talent is for the precise opposite. Harvey is the queen of money laundering, the mistress of the dodgy deal, and if you can understand her reluctance to brand herself as professor of financial mismanagement in an academic discipline generally hallmarked by an observance of formality, it would at least have the virtue of being the truth.

There again, telling the truth sometimes isn't all it's cracked up to be, if the reaction to her most recent research on money laundering is anything to go by. Harvey gives a measured half-smile. "It's fair to say it wasn't particularly well received when I published my findings last September," she says. And that's about as close to outspoken as she gets.

Ruffled feathers

Where most academics like nothing more than a bit of a spat and a hint of controversy, Harvey still plays by City rules, where feathers are only ruffled behind closed doors. So, just to be clear, the people Harvey managed to upset were the government, accountants and just about everyone else who stands to gain from implementing the money-laundering legislation.

Harvey's mistake, if you can call it that, was to do something one might have thought would be welcomed by everyone involved: review the current regulatory system and monitor its effectiveness. "Since 1993, 15 pieces of anti-money laundering legislation, each more exacting than the last, have been introduced," she points out, "and each time the government has justified the new measures by saying that money laundering is a massive threat to the integrity of the financial system. But no one had ever really taken a look at whether the legislation was effective."

One thing the regulations have done, of course, is ratchet up the cost of compliance. With banks, building societies, estate agents and accountants now obliged to keep track of their customers' financial dealings and report any suspicious activity, the cost of enforcing these new demands is passed on to clients in increased fees and charges.

"No one is suggesting there should be no regulation," Harvey says. "The question is more whether the threat justifies the expanding legislation or if we are merely adding layer on layer as a kind of political rhetoric. After all, banks always did use due diligence in getting to know their customers, even before they were required to by law, as it was business common sense."

Curiously, no one seems to be able to quantify the threat to the financial system. The government says it is "massive" but doesn't say how much, why, or in what way. "Instead," Harvey says, "the Home Office states 'the level of money laundering could be as much as 2.5% of GDP' without giving any idea of how the money is counted.

"From studying the data issued by the Home Office Assets Recovery Agency, there is no evidence to suggest there are vast inflows of money undermining the system. Most of the funds being recovered are in the order of sums of £500 - suggestive of relatively small-time drug dealing - that have been spent on items such as houses and watches. It is all highly unsophisticated stuff."

It is hard, talking to Harvey in central Newcastle - the heartland of Northern Rock, whose collapse was the first sign of endemic failures in the banking system - to escape the irony that while the government was taking a legislative sledgehammer to money laundering, it was operating a hands-off policy elsewhere in the sector. So was the government looking for financial trouble in the wrong place? "No comment," Harvey says firmly.

Harvey has always had an eye for the forensic - as a teenager she planned to join the police - but there was little to suggest, when she was growing up, that she would make a career either in finance or as an academic. She left school at 16 after her O-levels. "I was a very average student," she says. "I didn't shine at anything really. The school did suggest I stayed on for A-levels, but didn't press me when I told them I would rather join the police."

The West Sussex constabulary had other ideas, though, telling Harvey she was too young and should go away and "do something useful, like a secretarial course" for a year. So she went along to the local tech. "When I got there, I was told I was wasting my time doing a one-year secretarial and that I would be better off doing a two-year business studies course." By the end of the first year, Harvey's economics knowledge was a great deal better than her shorthand, and both her secretarial skills and the police were quickly forgotten as she switched to A-level law and economics.

Harvey then went to university in Bradford - "I didn't have a clue there was a higher education hierarchy and turned down an offer from Warwick to go where my brother had gone" - and graduated with a degree in economics but no idea of what to do with it. Thanks to a chance conversation with one of the locals in the pub where she was working, Harvey ended up doing three years' voluntary service overseas as an economist.

Big bang

She returned to the UK jobless, to find that one of her former professors had been contacted by the British Wool Marketing Board to see if he knew of any suitable economists to work for them. After a couple of years, she headed south to London in 1986 to work for Barings as a trader selling short-term Treasury products. She survived the Big Bang, but not Nick Leeson.

"I remember the day it all happened [23 February 1995] perfectly," Harvey says, "because it was the day I was getting married. I had to cancel our honeymoon in Dublin and rush straight into the office." Almost immediately after the bank collapsed, Barings employees split into two camps: those who made a dash for the headhunters, and those who stayed to help clear up the mess. Harvey fell into the latter.

"The bank couldn't just go straight into administration," she explains. "It needed a managed wind-down. We were in default with our foreign exchange contracts and we needed to find a way of settling our liabilities."

By the time everything was untangled a year later, Harvey was looking for a complete break from the City. While at Barings, she had taken a year's sabbatical to go back to Bradford to complete a PhD on taxation policy in developing countries, and she saw an ad in the Economist for a contract funded by the Department for International Development as an economic adviser to the government of Belize.

"I don't know how much difference I managed to make," she says, "though I do know that my leaving party was the first occasion on which the head of the Belize central bank had come to the British high commission."

She reminds me she is still bound by the Official Secrets Act and can't go into her time in Belize in any great detail. Which is a shame, because Belize is halfway between south and north America on the main drugs shipments routes, and Harvey almost certainly has some interesting stories to tell about the murkier side of the economy.

With hands-on experience of Leeson and Belize, you can see why money-laundering might have become of special interest to Harvey, but she ended up at Newcastle business school only because of her husband, she explains. "We'd done what I wanted in going to Belize, so it seemed only fair to move with him when he was offered a job teaching in the school of the built environment at Northumbria University."

She got her foot in the door with a part-time job teaching corporate finance in 2000 and hasn't looked back. So how does she rate herself as an economist after 30 years in the game? "Well," she says, "I was helping my daughter with her AS-level coursework the other week, and she came back and gleefully told me I'd got it all wrong. There again, I never was that strong on supply and demand."

Curriculum vitae

Age 50

Job Professor of financial management - or something similar - at Newcastle Business School, Northumbria University